A division bench comprising Chief Justice Mohan Shantanagoudar and K Sathish Nainan issued the order while considering a PIL filed by Kolakkadan Moosa Haji in 2012, seeking a direction for a CBI probe into the 'conspiracy' behind the riots.
The CBI was directed to probe the larger conspiracy behind the riots, in which eight persons were killed on May 2, 2003.
The state government also favoured a CBI probe into the incident.
The high court directed the state to provide all infrastructure to CBI to carry out smooth conduct of the probe.
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Meanwhile, Kerala Chief Minister Pinarayi Vijayan welcomed the verdict and said demand for a CBI probe was a long-pending one.
"Demand for a CBI probe to unravel the conspiracy has come at that time itself," he said.
In a statement, BJP state President Kummanom Rajasekharan said the verdict was victory to the "people's agitation in the area to expose the conspiracy behind the massacre".
"We hope that the terrorist link to the killing would be brought out with CBI probe," he said.